Interview with Paula Mints, Navigant Consulting

2010-05-04

The following is an interview with Paula Mints, the director of energy practice and principal analyst of the PV services program at Navigant Consulting, by Solarserver.com correspondent Christian Roselund.

Ms. Mints

Ms. Mints is the author of Photovoltaic Manufacturer Shipments, Capacity & Competitive Analysis 2009/2010, which Navigant Consulting released April 23, 2010. She has been a market researcher for the photovoltaic industry since 1998.

Solarserver: What can you say about the proportion of shipments that are coming out of China?

PM: Essentially, 46% of product was shipped out Taiwan and China, out of 7.9GW in shipments. Out of total volume 35% came out of China. It's a volatile market, as any market that it incentive-driven is volatile. You can get whole regions and individual manufacturers that will cut their prices to the bone, just to get a share of the market. It doesn't work over time, by the way.

As a global average prices dropped 23-33%. China has significant government subsidies for manufacturing and labor is cheap.

GAP is open to interpretation anywhere over the world. (Chinese manufacturers) had a little more opportunity to price aggressively. You have Europe losing significant share. More than any other region, it really affected Europe. Volume increased 44% yet revenues to manufacturers decreased by 16%. In 2009 it was cheaper to send it off to someone in China to make cells.

By buyer category, global prices dropped. Looking back over the history of PV, every single region has done this from time to time. Quite frankly, if the US had significant manufacturing support, we would do this as well. If you look at this individually, you can see the start-ups that are coming up. Really, (US manufacturers) haven't lost very much, because they were 6% of global production last year. SunPower does its technology manufacturing in the Philippines.

Solarserver: What about the rest of Asia?

PM: I don't see the Philippines booming, and Japan will do fairly well. The market in Japan is pretty focused on the manufacturing. The US doesn't have strong manufacturing support. Germany is looking to get some manufacturing support to make up for the loss of their tariff, but it's really not as easy as that. China and Taiwan, can hold on for a couple of years, but it is very expensive to support this manufacturing. It costs millions and millions of dollars to hold on to the point where you are. By the time they actually implement their tariffs, it will be pretty close to six gigawatts shipped into the this market. The Czech Republic has unsustainable feed-in tariffs that will consume one gigawatt. Most of that will come out of Taiwan and China. I still expect to see China and Taiwan on top. First Solar will have to fight to keep their number one position.

Solarserver: What can you say about European manufacturing?

PM: When we talk about Europe, overwhelmingly it is the German manufacturers. (German markets) were 53% of global demand, they will be more like 65% of global demand in 2010. It's not entirely rational, but politicians are not entirely rational. German manufacturers are most of European production, so it's primarily the Germans that are suffering. It's very hard to compete. There was a lot of outsourcing for everybody. For the next couple of years it is going to be very difficult to compete with manufacturing coming out of China or Taiwan. They can afford to price very close to cost.

Over time I've seen a lot of things change in this industry. It is still a very young industry and it is still one hundred percent driven by incentives. The US, from a much smaller volume, was a manufacturing leader in 1997, Japan was the leader after that, and then Europe. In the mean time, the Chinese were building up vertically integrated manufacturing. They were setting up a situation where they could control economies of scale all the way from polysilicon to modules. They can hold that role for three or four years, in this young an industry.

Solarserver: What factors will affect the future growth of the global solar industry? What sorts of impacts will growth in the Chinese solar market have?

PM: I think the prime factor is subsidies from the government. This is not a situation where you can say easily. Business installing systems benefits (solar companies) only inside China; you can't separate them out and say. Spain is considering making their feed-in tariff retroactive, and that could put a pall on the entire industry. The feed-in tariff demands a strong market. Anything can happen.

Solarserver: Do you see polysilicon shortages limiting industry growth?